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Department ofEconomics


Pegxit Pressure:
Evidence from the Classical Gold Standard.

Kris Mitchener and Gonçalo Pina

NBER Working Paper 22844, CEPR Discussion Paper 11640, and CESifo Working Paper 6212.

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We develop a simple model that highlights the costs and benefits of fixed exchange rates as they relate to trade, and show that negative export-price shocks reduce fiscal revenue and increase the likelihood of an expected currency devaluation. Using a new high-frequency data set on commodity-price movements from the classical gold standard era, we then show that the model’s main prediction holds even for the canonical example of hard pegs. We identify a negative causal relationship between export-price shocks and currency-risk premia in emerging market economies, indicating that negative export-price shocks increased the probability that countries abandoned their pegs.


LSB Research, ECON, Kris Mitchener, Working Papers